In July 2022, my wife and I bought into Barclays (LSE: BARC) at 154.5p per share, for our family portfolio. It turns out I wasn’t quite prepared for just how volatile the Blue Eagle bank’s stock has been this month!
Barclays stock is far from boring
After the pandemic panic of 2020/21, I got into the habit of thinking that FTSE 100 bank stocks were becoming ‘boring’. How wrong I was.
Here’s how the Barclays share price has performed over seven different timescales:
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| Current price | 139.78p |
| One day | -2.0% |
| Five days | -1.9% |
| One month | -18.1% |
| Year to date | -11.8% |
| Six months | -11.3% |
| One year | -17.0% |
| Five years | -32.3% |
Barclays shares have lost value over all seven periods, ranging from one day to a half-decade. Over five years, they have plunged by almost a third — another blow for the bank’s long-suffering shareholders.
Furthermore, this popular stock has ridden a real roller coaster lately. As recently as 8 March, the share price hit a 52-week high of 198.86p. By Monday (20 March), it had collapsed to a 52-week low of 128.12p.
At the current price of 139.78p, this stock now stands 9.1% above Monday’s bottom. Even after this comeback, the stock is down a whopping 29.7% from 15 days ago. Now that’s volatility for you.
Would I buy more Barclays shares?
To date, we are sitting on a paper loss of almost a tenth (-9.5%) on our Barclays stake. Of course, I’d be delighted had we sold on 8 March. However, I’m a long-term value/dividend/income investor and not a short-term trader. When it comes to deciding whether I think Barclays shares are still a good buy at these price levels, I want to consider several aspects.
First, Barclays is worth £22.1bn today. To me, that seems a modest price tag for a UK Big Four bank. However, Barclays has a large investment-banking arm, whose earnings can be very volatile.
I also want review the bank’s share fundamentals, shown here:
| Price-to-earnings ratio | 4.7 |
| Earnings yield | 21.3% |
| Dividend yield | 5.2% |
| Dividend cover | 4.1 |
At first glance, it seems to me that Barclays must be one of the cheapest shares in the FTSE 100. After all, this stock’s price-to-earnings ratio below five translates into an earnings yield above 20%. In addition, these shares offer a dividend yield above 5% a year, covered more than four times by earnings. Again, this looks like a wide margin of safety to me.
However, these numbers don’t tell the whole story, since they are based on trailing (historic) earnings. While UK banks made big profits in 2022, this year is set to be so much tougher.
Indeed, with the British economy weakening, it’s possible that the UK could enter a recession in 2023. In this scenario, I’d expect bank earnings to fall, driven lower by rising bad debts and loan losses.
Then again, I hope that much of this negative news is already baked into the discounted Barclays share price. Hence, I’d happily buy more today — if I had any spare cash, that is!
